Success of UFB not reliant on second cable: Minister

Industry reaction to the demise of Pacific Fibre

The success of the government-backed Ultra Fast Broadband scheme doesn’t depend on a second international cable being built, says ICT Minister Amy Adams.

Pacific Fibre directors announced yesterday that the project to build an international cable connecting New Zealand, Australia and the US would be abandoned. The cable would have been a rival to the existing Southern Cross Cable which is half-owned by Telecom.

Chair Sam Morgan says that the Pacific Fibre cable was necessary to achieve the economic aims that the government has for Ultra Fast Broadband.

Adams’s office replied with a statement late yesterday:

“While a second international cable is seen as beneficial for New Zealand into the future, the success of the UFB programme is not in any way reliant on a second cable. Our assessments show the Southern Cross cable has sufficient capacity in the medium term. In addition UFB is likely to use significant amounts of locally cached content reducing its reliance on international bandwidth. Planned upgrades of the Southern cross cable will further enhance existing capacity,” she says.

“The Government committed to being a foundation customer of Pacific Fibre through REANNZ because we do see value in a second cable long term. It is our expectation that as market dynamics change in the future new cable proposals are likely.”

Comment from other industry stakeholders is as follows:

Institute of IT Professionals CEO Paul Matthews

“It’s really unfortunate for New Zealand; we need more than one option for international connectivity. It’s fantastic that Pacific Fibre gave it a shot. It was always going to be a hard ask against a competitor whose cable was already paid for.

“I’m concerned that there is not another confirmed option. There have been prospects mooted from time to time – Kordia and Chinese interests and we can only hope one of those is revived or something else comes up.”

As to whether anything could have saved the effort, Matthews expresses faith that the principals of Pacific Fibre had tried all the appropriate avenues. “People have made calls from time to time about various funds becoming involved; but that’s up to the managers of those funds. If anyone could have brought them on board, I’m sure [Pacific Fibre’s principals] would have.”

TUANZ CEO Paul Brislen

“It’s a real shame; we really need more competition on the Pacific leg and I was hoping they would deliver it. It’s of concern that we don’t have more interest in funding connectivity to the US.

“I do wonder why there’s no mention of the New Zealand Super Fund getting involved. I would have thought they were prime candidates for investment in this kind of infrastructure. [It would have] long-term benefit to the country as a whole; good solid return on investment for many years to come. It seems to me it would have been perfect for them. The Aussies were in there - I’ve been told the Australian Federal Pension Fund was one of the potential investors – but we were not.

“We still have talk of the Chinese cable from here to Australia and that would certainly be a help, if it gets off the ground – it’s gone very quiet lately.”

However, prospects of a link to the US look bleaker, he says. “Telstra’s just

laid fibre from Australia to the US and if more Australian companies decide to [communicate] directly to the States that leaves us out in the cold.

“Unless somebody steps forward in the next little while, I fear we could be completely stuck with what we’ve got today; bearing in mind that Southern Cross’s life expectancy is 20 to 30 years and it went in 2001. So we’ll have to consider changing that out soon.

“We need more investment and more competition as well.”

CEO InternetNZ Vikram Kumar:

“I’m deeply disappointed. We need to start thinking of alternatives. For something else to work I don’t think we can escape from a need for some sort of government funding.”

Support from government has been very low-profile so far, he says, amounting to ensuring the KAREN science network would provide a big slice of demand for the cable.

“Government should have a debrief with the Pacific Fibre team soon, to establish why it didn’t work and whether anything can be done. The proposed Chinese trans Tasman cable would be a help if it went ahead, but it’s a direct cable [to the US] that will be the game-changer.

“The capacity is there [on Southern Cross]; it’s a matter of the price we pay for it, while they’re a monopoly.”

Labour ICT spokesperson Clare Curran:

"“Its failure is a blow to local industry, it’s a blow to the government’s UFB project and it’s ultimately a blow to the Kiwi consumer and business community wanting to take advantage of new technology.

“The government could have been playing closer attention and should have factored into its business model the need for greater international interconnectivity. The question is, what will they do now to ensure their UFB programme doesn’t continue to flounder?

“New Zealand’s only existing international cable was not allowing the pricing needed to act as an incentive to our market to invest in retail products to stimulate high uptake of new broadband as it becomes available.

“To date the only real recipient from the UFB has been a wealth transfer to Telecom and Chorus shareholders. New Zealanders won’t be seeing any benefits anytime soon,” she says.

Telecommunications Carriers Forum CEO David Stone:

“Because of the structure of my organisation, I’m not able to comment.”

Vodafone comment:

We were pleased to partner with such an innovative and entrepreneurial business as Pacific Fibre, signing on as the company’s second major customer. So we’re very disappointed that the project hasn’t come to fruition. We are still in favour of a second international cable to help break down the digital divide between New Zealand and the rest of the world. However, for now we will continue with our current international bandwidth arrangements.

Kordia comment:

As the company that promoted the OptiKor trans-Tasman submarine cable, we know from experience just how difficult it is to get these kinds of projects launched.

There is a necessity for a new trans-Tasman [sic] cable from a diversity and resiliency point of view, but as we are reviewing our position, it’s really too early for us to comment.

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